SPN’s sources and requirements for funds
Superior Energy Services’ (SPN) internal cash generation hasn’t been adequate to cover its external obligations. In fiscal 2015, SPN’s internal source of funds as a percentage of external funds requirement was 29%. Its internal source of funds is expressed as free cash flow plus cash and marketable securities. External fund requirements are defined as contractual obligations plus dividend payments. SPN’s dividend payment in fiscal 1Q16 remains unchanged compared to a year ago.
Forum Energy Technologies’ (FET) internal source of funds as a percentage of external requirements was also 37% in 2015.
Changes in fund obligations and supply
In fiscal 1Q16, Superior Energy Services reduced long-term debt by 1% from the previous quarter. By the end of fiscal 2015, SPN’s contractual obligation or debt repayment obligation was $2.65 billion. From fiscal 2014 to 2015, SPN’s internal sources of funding decreased marginally as a result of lower free cash flows. SPN’s external fund requirements fell 5%. The ratio deteriorated marginally in 2015 as a result.
SPN is 2.3% of the iShares US Oil Equipment & Services ETF (IEZ).
Next, we’ll discuss Superior Energy Services’ historical valuation multiples.